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Powering The Future

MIT's Innovative Plan For The Future Of U.S. Energy

Instead of focusing on a moon-shot funded by the federal government, a look at America’s "energy innovation system" finds that a much more likely solution will come from marginal, local developments—and that’s where we should be investing.

What will it take for the U.S. to create a low-carbon energy infrastructure? The answer, according to a big study of America’s "energy innovation system," is something different from what we have now, and something different from the conventional wisdom about the future of energy development.

The report, Unlocking Energy Innovation, is based on a three-year research project by faculty and students at MIT, and appears as a book by Richard Lester, a professor at MIT, and David Hart, a professor at George Mason University.

It lays out a 40-year framework for decarbonizing the U.S. energy system, arguing that a "fundamental transformation" is needed to avoid the worst ("unmanageable") impacts of climate change. "We face a very big innovation challenge over the next few decades, bigger than most people recognize. And the system as a whole isn’t close to being up to the task," Lester says.

The authors say energy innovation has lagged other sectors because companies and financial institutions have been "risk-averse," and often had a "strong interest in preserving the status quo." But it also says energy is different: It takes a long time to bring technology to commercialization because the system is complex and contingent. Before you can introduce lots of wind turbines, for example, you first need a better grid, more accurate forecasting, more energy storage, and so on.

The book advises against a "moonshot mentality" in favor of long-term collaboration between public and private research laboratories, small and large firms, financial intermediaries, schools and universities, and local, state, and federal agencies. "There is an enormous innovation agenda that does not depend on a ‘moonshot’ mentality," it says.

Lester and Hart say intensive government-orchestrated projects like the Manhattan or Apollo Projects won’t bring about useful innovations. Instead, they say policy-makers should focus on what is achievable in the near and longer terms. It sees three "waves" of development, starting with a focus on energy efficiency (particularly cars and buildings). Between 2020 and 2050, the U.S. can bring down the costs and risks of "known low-carbon energy-supply and electricity-storage technologies." And then, after 2050, it can finally bring fundamentally new energy technologies to market.

Lester and Hart dispel the idea that we’re going to see breakthrough technologies in "the next few decades." And they say current low carbon technologies "are either too expensive or too difficult to scale, or they have other detrimental economic or environmental features." Any new energy sources have to compete on price with coal and natural gas, which account for 70% of electricity generation nationwide.

The authors also downplay the importance of a "carbon price," long seen as key to energy innovation by many. Lester and Hart see cap-and-trade schemes or a carbon tax (ways to achieve a price) as "necessary but not sufficient to stimulate innovation." The book models four stages of innovation, from initial discovery, through prototyping, initial deployment, and full commercialization, and finds that a carbon price would do little to incentivize technologies in the middle two stages, or the so-called "valley of death."

More broadly, the report recommends looking beyond Washington, arguing that the parties are unlikely to come to agreement on a comprehensive way forward. Instead, it says the ecosystem may be better served with state or regional level initiatives, which are easier to negotiate and more responsive to local needs.

Like many others, Lester and Hart see electrification as the easiest route to cleaner energy, and energy independence, and the book envisages electricity use tripling by 2050. The authors argue that full deregulation of the electricity market would introduce greater competition, helping spur more innovation, and reducing the power of individual companies. Instead of large integrated companies, producing, distributing and selling electricity, utilities should become "smart integrators" hooking all kinds of new entrants, including end-users generating their own energy.

The book shies away from some questions raised by its recommendations—including how status quo companies can be persuaded to give up their position. But it is thought-provoking, comprehensive, and often more practical than other energy plans. It is definitely worth a look.